DV Journal

President Biden says making high-tech microchips in the United States is a national security priority instead of buying them from abroad. In August 2022, he signed the CHIPS and Science Act, making $280 billion available to domestic semiconductor research and manufacturing operations — a response to growing concerns about U.S. reliance on China’s production facilities.

“We went from producing 40 percent of the world’s chips to just doing 10 percent. But not anymore,” Biden said in a November 27 speech. “All over the country, semiconductor companies are investing hundreds of billions of dollars to bring chip production back home to the United States.”

But the same day Biden was making that speech, the Environmental Protection Agency was continuing its push to practically ban the production of chemicals like methylene chloride, perchloroethylene (PCE), and carbon tetrachloride (CTC) — all vital to the production of those chips.

Which leaves the U.S. microchip industry and its suppliers caught in the middle.

The EPA wants to curtail the chemicals used to make polysilicon, the basic material of computer chips — an obvious obstacle to domestic production. For example, semiconductor manufacturing requires massive amounts of PFA resins, made with chloroform — a co-product of methylene chloride and CTC – for tubing that pipes liquids, slurries and gases around facilities.

The EPA’s rule would also override current workplace regulations from the Occupational Safety and Health Administration, adding a redundant layer of bureaucracy and a roadblock to America’s path to tech independence, industry sources say.

A $40 billion, taxpayer-subsidized chip-making plant (known as a “fab”) in Arizona is useless if the chemicals needed to make the chips are either banned or become so costly that manufacturing is no longer realistic. Members of the administration have acknowledged the dilemma.

“We can have as many fabs as we want, but the reality is, we also need the supply chain — the chemicals, the material, the tools that go into those fabs,” Commerce Secretary Gina Raimondo said at a briefing earlier this year.

In a lengthy comment on the EPA’s proposed rule changes, the Semiconductor Industry Association said its members “are aware of numerous chemical substances in use at their facilities that are absolutely essential to the continued production of reliable semiconductors and to the expansion of production facilities and capabilities in the U.S. under the CHIPS and Science Act.”

The EPA has proposed another rule change that could further hamstring semiconductor research and development. It would eliminate low volume exemptions (LVEs) for new formulations of PCE, which chipmakers continually develop as part of their product-innovation process.

If the LVE exemptions are eliminated, every new chemical formulation would be subject to EPA reviews called premanufacture notices (PMNs). According to David B. Fischer, an attorney and former deputy assistant administrator at the EPA, completing those reviews can often take over a year. That is yet another obstacle to the stated goal of the CHIPS Act.

“The PMN process has been a significant frustration for scores of industries who rely on innovation to stay competitive,” Fischer said. “If a PMN gets bogged down for years, then companies opt to go offshore.”

Beyond the conflicting goals of CHIPS to foster domestic production on the one hand and the determination of EPA to restrict the use of PCEs through various schemes on the other, the realities of today’s global economy could render the entire issue moot, leaving the United States further reliant on foreign suppliers of semiconductors.

Large manufacturers with deep pockets won’t wait forever for U.S. policymakers to settle their conflicts before the chipmakers decide to just pull up stakes and build production facilities overseas.

Charles Wessner, an adjunct professor of science, technology and international affairs at Georgetown University and a senior adviser at the Centers for Strategic and International Studies, conceded that semiconductor manufacturing requires “some nasty products that have to be treated carefully.”

Nevertheless, he said, for decades, the industry has demonstrated a positive commitment to environmental safety. “These aren’t people who dump toxic waste into pristine streams,” says Wessner, who previously founded and directed the National Academy of Sciences’ Technology, Innovation, and Entrepreneurship Program.

“If we’re going to compete and protect ourselves against hostile powers and create wealth, we need to adjust the balance between environmental protections and supporting new growth.”

According to Wessner, the average salary of workers in the industry is $95,000. A typical semiconductor plant creates thousands of well-paying jobs directly and indirectly, serving as a major catalyst for regional economic revivals.

“Some want sensible rules, but we need to get past the obstructionists,” he said. “People are deeply attached to their smartphones without acknowledging the toxic materials required to produce them. They want clean energy but don’t want any windmills in their backyards. They don’t want any fields nearby covered with solar panels or transmission lines anywhere in sight.”

“It doesn’t just fall from heaven,” he added.

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American politics may be harshly divided along unbendable partisan lines, but one topic brings the two parties together: China.

President Biden’s director of national intelligence, Avril Haines, said China “represents both the leading and most consequential threat to U.S. national security and leadership globally.”

Former president Donald Trump’s national security Adviser John Bolton called China “the existential threat in the 21st century.”

China watchers are now raising the alarm about China’s ability to evade Western sanctions on technology, particularly microchips, and increase its ability to threaten the United States.

National security experts are sounding the alarm about open-source tech, which is rapidly becoming a workaround to sanctions against China’s advanced technology sector. With chips — which are used to power cell phones, automobiles, drones and advanced military tech — the stakes couldn’t be higher.

A computer chip with a history dating to the early 1980s could revolutionize the technological sector. The RISC-V (pronounced “risk five”) is open-source standard technology that “allows anyone to freely develop their own hardware” to run software. Instead of using proven, vetted technology that is not prone to manipulation but is subject to U.S. export controls — such as those developed by Intel, AMD or Arm — open-source technology can be used by anyone, anywhere, with the know-how to do so, opening up a world of potential security risks.

Rick Switzer, a director in the State Department’s Special Envoy for Technology office, warned the next pandemic could involve chips made in China. “The attacks were traced to a cloud service provider for regional banking firms, but outages now appear to be more widespread, covering close to 40 percent of all cloud storage services across the country,” he wrote in “Future Scenario 2028” for Special Competitive Studies Project.

“Government investigators finally discover the issue: a hardware-based on-off switch embedded in a series of voltage-regulating chips. The attackers flipped billions of these switches simultaneously, preventing logic chips from connecting to the storage chips in cloud servers.”

Switzer’s worry is focused on the RISC-V chip model.

Almost six dozen Chinese companies, including companies the U.S. government has placed on the restricted entity list, are involved in the RISC-V alliance.

Chinese chip design firms switched to the technology because of its accessibility and the Chinese government’s push to do so. That includes tech giant Alibaba, which released two RISC-V-based processors. So far, it appears China remains behind the curve on RISC-V. Alibaba’s RISC-V processor can only run simple processes on Android’s O.S. But if U.S. and Chinese companies are allowed to continue sitting side by side in the development of that technology, that soon will change.

“We’re on track to have 62.4 billion RISC-V cores by 2025,” said Calista Redmond, RISC-V International CEO, in 2020. “The market for RISC-V IP and software is expected to grow to over a billion dollars by 2025.”

Not everyone sees that as good news.

“China’s pivot towards open-source chip design demonstrates how difficult it is to implement restrictions on any single type of technology,” said Elaine Dezenski, senior director and dead of the Foundation for Defense of Democracy’s Center of Economic and Financial Power. “On the other hand, export controls, sanctions and related restrictions have tremendous near-term value in protecting U.S. leadership and constraining malign uses of American technology. But the toolkit of U.S. economic statecraft must remain as flexible and nimble as those inevitable attempts to circumvent it.”

Tech commentators believe American corporations will simply follow the profits.

“American companies do business with China for many reasons, but a lot of the time it comes down to money,” said Amy Chang, resident senior fellow in Cybersecurity and Emerging Threats at the R Street Institute on China’s allure to U.S. companies. “Labor and logistics and taxes are cheaper than doing business elsewhere, and because there is a large swath of relatively wealthy middle and upper class in China as prospective consumers.”

Ryan Nabil, director of technology policy at the National Taxpayers Union Foundation, said the interdependence of the American and Chinese economies means more business for everyone.

“Bilateral trade relations continue to be driven largely by the market forces at play in each economy,” Nabil said. “Top U.S. exports to the PRC include soybeans, civilian aircraft, automobiles, corn and coal. Conversely, top imported products from China include machinery and mechanical appliances, furniture, toys and other miscellaneous manufactured items.”

There is disagreement on what the United States can and should do regarding RISC-V and China. Switzer suggested a national security review of open-source hardware in critical infrastructure, import restrictions, and more domestic investment. Nabil wants more transparency and disclosure requirements before determining risks.

He said, “Clearer and evidence-based security standards could be helpful” regarding device security. Nabil added that open-source technology is overall positive because it “makes it easier for more firms, including U.S. and European companies, to enter the global semiconductor markets.”

RISC-V International did not comment on whether there was concern the U.S. government might take steps to make RISC-V adoption harder for companies.

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